Knowing and Making

The Royal Mail is caught in the middle of a collision between its past and its future. Decisions made in the past have led to a £10 billion pension fund deficit. Other decisions - whether by the board or by the Post Office's regulators - have held its business model back from evolving in a world where communications technology is changing faster than any other. I don't know about you, but I send barely any letters nowadays; the occasional Mother's Day card and VAT return is about it. I pay bills online, send invoices by email and even our direct marketing is mostly by email. On the other hand, I probably receive more than I used to: Amazon and other online stores have enabled a combination of online ordering and delivery service to compete very powerfully with retailers. And the margins on these deliveries must, I suspect, be better than on ordinary letters - though there is much more competition. So the Royal Mail has two problems. Its past has created huge obligations, i...

Robert Peston reports the government's "sleight of hand" in separating the Royal Mail's assets and liabilities in order to sell it off. Well, there's some argument there. But perhaps this is the only way the organisation can be saved. There are two reasons this might be a good policy: A thriving, efficient and well-managed Royal Mail provides a boost to the economy. It's a key part of our infrastructure and, when it works properly, it helps to speed up projects and increase GDP. When it doesn't, it interferes with business activities (and those of consumers), creates risk and delay, and gives people excuses for not delivering their side of an agreement. In short it creates friction in the economy, which destroys economic activity with no corresponding gain (a negative-sum game). If this separation is a necessary step toward privatising the organisation, we will all gain from it. The pensions are likely to be more efficiently handled as part of a larger pu...